CBP Importer Verification Proposal Shifts Enforcement Burden to Brokers, FedEx Says

CBP's proposed rule to impose new importer verification requirements on brokers would transfer the government's oversight of importers on to brokers, FedEx said in comments to CBP on the proposal (see 1908130031). "CBP, as a law enforcement agency, should be the party primarily charged with verifying importer identity for security purposes," the company said. CBP should instead implement Section 114 of the Trade Facilitation and Trade Enforcement Act, which called on CBP "to develop criteria that an importer must meet in order to obtain an" Importer of Record number, FedEx said.

Once Section 114 regulations are in place, CBP won't need additional requirements for customs brokers to verify importers assigned an IOR number "as CBP will have already verified that importer to its own standards," FedEx said. The company also questioned the need to verify existing clients and to reverify all importers annually. CBP should instead allow a "grandfather clause" for existing clients and exempt trusted trader program participants from the requirements, it said. The Association of Global Automakers also said trusted traders should not be subject to the requirements and noted that "It would have the added salutary effect of providing a concrete benefit to trusted traders."

The U.S. Business Alliance for Customs Modernization, a group of big exporting and importing companies that includes Nike, Cisco and Home Depot, said in its comments that CBP should "narrow the list of proposed data elements to only those elements that are required to complete Form 5106." That would "enable brokers to dedicate more time and resources to collecting and verifying information from those importers that are more difficult to verify or that raise red flags, thereby furthering CBP’s goal of reducing fraud in the system," BACM said.

The Southern Shrimp Alliance and the Committee to Support U.S. Trade Laws, both of which generally support tougher enforcement of antidumping and countervailing duty orders, said they back CBP's proposal. "While this rule is not likely to fully address non-payment of duties or the circumvention of AD/CVD orders and other trade actions, it does help to plug one significant hole that has long been abused," CSUSTL said. Still, CSUSTL, like the National Customs Brokers & Forwarders Association of America (see 1910110011), said there's potential for importers to take advantage of the new rules through self-filing. "With their loss of access to enabling brokers cut off or at least limited by this proposed rule, there may be a significant shift in the number of non-paying importers who choose to self-file," CSUSTL said. "We encourage CBP to also examine what steps can be taken to place similar requirements on self-filers so that their identities are also factual and verifiable."

The proposal seems wholly different from what was envisioned in TFTEA when that law called for a report to Congress on a system for customs brokers to review agency information to verify importers, said the JFK Airport Customs Brokers and Freight Forwarders Association. Congress clearly "contemplated a database of government-collected data that would aid customs brokers in verifying importer identity; however, to date, and to the best of the JFK Association’s knowledge, CBP has submitted no such report to Congress," it said. "CBP’s delay in providing this report prevents Congress from creating an important resource for customs brokers to fulfill the verification requirements mandated by TFTEA."

UPS Supply Chain Solutions objected to some of the data requirements and said that "in person" meetings between brokers and clients aren't necessary for verification "in today's times." C.H. Robinson called the reverification requirements the "most significant issue" and said such rules would require new personnel and travel expenses that are "extremely cost prohibitive." The reverification requirements go beyond TFTEA's provisions and CBP should use different rules for low volume importers.

The proposal may conflict with the E.U. General Data Protection Regulation, said Expeditors International. "If the final rule requires collection and retention of personal data such as date of birth and a copy of a government issued ID, U.S. companies operating in the E.U. will be required to disclose protected personal data to the U.S. government without first fulfilling their legal obligations." Such a requirement creates an "untenable choice" and "It ignores longstanding norms of international comity," the company said.

CBP's proposal also seems to create a new trade barrier, the American Association of Exporters and Importers said. The rulemaking could result in "a higher level of scrutiny for U.S.-based companies or create a non-tariff trade barrier with the holding of shipments of small foreign based companies who are new to international trade because they do not have or do not have this information available for the customs broker or surety companies," AAEI said. Multiple filers, including the National Association of Manufacturers, said the proposal creates some data security concerns.